The Washington D.C. Convention and Sports Authority (Events DC) has owed the city itself a tidy sum for some time now. In fact, an audit by the D.C. auditor last year maintained it owed the city $68.7 million in excess cash it had accumulated contrary to statute. And in a new audit it found that the dollar figure due this year is $45 million, but as the city auditor Kathy Patterson wrote, “Councilmembers did not take any action on our findings a year ago and have shown no inclination to act since then despite facing a challenging revenue picture.” 

How does this kind of short-changing come to pass? The audit broke it down:

• Excess cash exists if “the balance of cash and investments of [Events DC] in the Convention Center Fund exceeds the balance of current liabilities, reserves, and any amounts [set aside to] purchase or redeem its outstanding indebtedness.” But Events DC tried to offset the cash in the Convention Center Fund with the liabilities of its other funds—the Sports and Entertainment Fund, Marketing Fund, and a TIF bond fund. 

• Events DC claimed that its “current liabilities” included unaccrued interest on its bonds—a noncurrent liability, according to its financial statements. 

• The statute let Events DC maintain a debt service reserve equal to “the maximum annual debt service on outstanding bonds and notes issued by [Events DC].” Events DC selected from different years the maximum annual debt service on each series of its bonds, which exceeds the largest amount it will pay in any one year.

• The statute also allows Events DC to keep an operating reserve up to 1.5 times its “annual operating expenditures”; however, Events DC decided that “expenditures” really meant its budget. And Events DC consistently budgeted much more than it could spend.

According to a release from the auditor, “The excess cash amount that has been determined by Events DC was incorrect because the excess cash calculation rested on a series of errors, including using operating budget instead of operating expenditures to calculate the operating reserve. Events DC interpreted expenditures to mean budget by referencing a Memorandum of Understanding (MOU) between the Chief Financial Officer (CFO) and Events DC which incorrectly stated ‘budget’ instead of ‘expenditures.’ Events DC’s interpretation was contrary to the plain language of the statute.”

It’s not uncommon for entities to contest the findings of an audit, but in this case, Events DC didn’t agree with any one of the auditor’s recommendations, repeatedly beginning its comments with the words “Events DC does not concur.”

The auditor is standing by her guns and wrote in a note to Barrett and Greene Inc. that “They’ve proposed legislation to “fix” the disagreement which would basically legitimize the way they do the calculations! And I think instead of doing that the legislature should just junk the requirement to repay the excess, since no one is going to enforce the current law!”

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